Question

Ten years ago, Ms. Dee purchased 1,800 shares of Fox common stock for $134 per share. On June 2 of the current year she sold 900 shares for $97 per share. Compute Ms. Dee’s recognized loss on sale assuming that:

Required:

1. She purchased 1,000 shares of Fox common stock on June 28 for $99 per share.
2. She purchased 1,000 shares of Fox common stock on August 10 for $104 per share.
3. Compute Ms. Dee’s tax basis in the 1,000 shares purchased in part a.
4. Compute Ms. Dee’s tax basis in the 1,000 shares purchased in part b

Answer 1

Wash Sale Loss is an exemption when capital loss is realised but not recognized.

A wash sale loss exists when a security is sold for a loss and is repurchased within 30days before or after the sale date. This loss may not be deducted, but is added to the basis of the repurchased asset.

a.

Realised loss = 900 shares * ($134 - $97)per share = $33300

As the common stock is repurchased before 30days after sale date, no loss is recognized

Recognized loss = 0

b.

Realised loss = 900 shares * ($134 - $97) = 33300

As the common stock is repurchased after 30 days after the sale date, all the loss is recognised.

Recognised loss = $33300

c.

Tax basis = Purchase price + Unrecognized loss

=(1000 shares * $99 pershare) + $33300

=$132300

d.

Tax basis = Purchased price

= 1000shares * $104 pershare

= $104000

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